The Consumer Financial Protection Bureau (CFPB) wants to improve the collection, reporting and sharing processes for Home Mortgage Disclosure Act (HMDA) data. This effort has the potential to reduce the burdens on lenders; but in its short history the CFPB has not earned a reputation for taking action solely in the interest of financial institutions.
Collection and Reporting
Approximately 70 percent of all loans eventually sold to a Government-Sponsored Enterprise use the Uniform Loan Delivery Dataset of the Mortgage Industry Standards Maintenance Organization (MISMO) data standards for residential mortgages. Alignment of the HMDA data requirements to this open and free standard already being used by many lenders provides an opportunity to improve market efficiency, market understanding, and market oversight. (See April 15, 2014 article regarding MISMO.)
This proposal would reduce duplication of effort for the originators of loans already complying with the MISMO standard. But expanding coverage to lenders not previously covered (See Part 2 of this series) and this proposed expansion of the amount of data collected would be a crushing blow for many lenders.
Another major issue is whether the CFPB will have access to the full MISMO dataset or only to Uniform Loan Delivery Dataset. In these days of Edward Snowden and government access to way too much data about individuals, we suspect the CFPB will hit the wall if they try to grab too much information.
The CFPB is consulting with other federal agencies about potential improvements to the HMDA data collection and disclosure process. One idea is to streamline the submission and editing processes for lenders by using an application program interface (API) to connect bank’s software to the CFPB’s back-end systems.
The proposed use of the API can truly simply the reporting process, but the thought of the regulators having real time access to data is truly scary. Examiners could, for example, identify discrimination problems and Truth-in-Lending violations within seconds of a loan being booked.
The CFPB seeks to provide better access to information. Each September, the Federal Financial Institutions Examination Council releases the HMDA data to the public. For years, there have been complaints about the size and complexity of the data and the difficulty in using the data. Recently, the CFPB launched a new HMDA tool that provides the public with easier access to information for 2007 through 2012. Users now have the flexibility to filter the data, download it, create summary tables, and share the results. The tool uses a format that is compatible with most spreadsheet programs and most programming software.
This part of the proposal would provide consumer groups, plaintiff attorneys and others with the ability to download HMDA data directly into software that perform regression analysis and other statistical analysis. This possibility should be scary to HMDA-reporters that do not thoroughly scrub and analyze their HMDA data prior to submission.
Through this series of articles, we have provided information about where HMDA is headed. We believe most of what has been presented will be reality sooner than we would like. Some aspects of the CFPB’s plans may be a little overreaching in the near term but are likely to occur over a longer timeline.
The changes will be difficult for most lenders to absorb, but the burden for a small community bank, that has never been covered by HMDA, that is suddenly thrust into the world of a vastly expanded HMDA will be overwhelming.
The speculation will soon end. The proposed regulations should be published this summer. We encourage our readers to get actively involved in the process by reviewing the proposal and providing information during the comment period. A brief, thoughtful comment letter than includes facts regarding the impact of the proposal on your institution gets the attention of the regulators and can change the course of the revision process.